The rule--usually described in business--states that 20% of a company's clients produce 80% of the income. As a result, business owners should concentrate their efforts mainly on the top 20% and not so much on the other 80% who disproportionately drain your company's time, energy, and mental capacity.

Give Credit Where It's Due
Most people don't know that the "80-20 Rule" goes by another name: the Pareto Principle. Vilfredo Pareto, an economist at the turn of the 19th century, originally applied his law to income distribution, saying 80% of society's wealth and income accrues to 20% of the population. Generalized, his law becomes, "80% of all outputs [or consequences, or results, or profits] come from 20% all inputs [or causes, or efforts, or clients]."

Don't Re-Invent the Wheel
Pareto's powerful principle reaches far into our lives. If you have the presence of mind to recognize how a small number of people/events/bills can affect the majority of your time/energy/spending, then you're already ahead of most consumers.

An enormous amount of "foreclosure bargain-hunting" is going on these days. As the massive number of former homeowners continues to grow, many companies are making hay off of an unfortunate national trend.

Auction houses such as Hudson & Marshall and Williams & Williams are currently selling thousands of foreclosed properties--for pennies on the dollar--in nearly every state.

Of course, these regional auction houses will be outdone by the big boys. Where ever there's a national treasure hunt taking place, the Big Search sharks are never far behind. Yahoo and Google (thanks, Jonathan) are circling the sinking homeowner(ship), each recently unveiling shiny new foreclosure search engines. We'll bet you the home-equity value of an interest-only-ARM (which by the way is zero) that MSN and Ask.com aren't far behind.

Three chief executives with ties to the mortgage crisis received nearly a half-billion dollars in compensation over the past few years, according to a congressional report issued last Thursday; these paydays come despite the fact that the values of their underlying companies have collapsed under the enormous weight of the so-called "sub-prime mortgage crisis". Moreover, these men will continue to receive multi-million dollar paydays going forward--even if not actively employed--in the form of stock awards, deferred compensation, and golden-parachute retirement plans.

I sat watching Angela Mozilo, CEO and President of Countrywide Mortgage, testify in front of Congress (yes, I watch C-SPAN regularly), and the corporate apathy was quite clear. Members of his compensation committee also testified that they saw "no irregularities" in the hundred-million-dollar payouts to departing executives of these Titanic-like sinking corporations they leave behind.

The congressional report stated that America's top 3 sub-prime lenders, whose CEOs all testified before this congressional committee, lost a combined $20 billion in the last two quarters of 2007 alone, as investments related to sub-prime mortgages fell apart.

But Wait...There's More
In other gloomy news, Jeannine Aversa of the AP reports that U.S. employers cut jobs by 63,000 in February, the most in five years, a clear sign of our country's continued economic decline:

"Job losses were widespread, with hefty cuts coming from construction, manufacturing, retailing, financial services and a variety of professional and business services. Those losses swamped gains elsewhere including education and health care, leisure and hospitality, and the government...the health of the nation's job market is a critical factor shaping how the overall economy fares. If companies continue to cut back on hiring, that will spell more trouble."

Shoes Continue to Drop
Consumer confidence also continues to fall even as the Federal Reserve has signaled that the central bank will keep on cutting a key interest rate to bolster the economy.

"We've gotten to a point where there's very little for the consumer to cheer about. Everywhere you look — homes, grocery stores, gasoline stations — there are things that are all weighing on consumer attitudes," said Richard Yamarone, economist at Argus Research. "You have soaring energy and food prices, rising home foreclosures and uncertainties about the jobs climate. When you mix it altogether it is a recipe for miserable consumer sentiment."

Congress and the White House, meanwhile, have speedily enacted a relief package that includes tax rebates for households and businesses. Rebates of up to $600 for individuals or $1,200 for married couples should start going out in May. Beginning this week, the IRS will begin issuing letters to over 130 million households reminding them to file a 2007 federal income tax return in order to receive a rebate check.

The Fed has already cut its target for short-term interest rates, which influences borrowing costs across the economy, to 3% from 5.25%, where it stood in September. Fed Chairman Ben Bernanke and his colleagues are widely expected to cut rates again when they meet next week...many analysts predict a rate cut as high as three-quarters of a percentage point, departing drastically from the more typical quarter or half-point cut.

Back on the Home Front
According to the Wall Street Journal, the number of American homes entering foreclosure rose to the highest level on record in the fourth quarter of 2007.

"We are likely to be living with a high degree of uncertainty for some period of time about the ultimate magnitude and duration of the slowdown under way," said Federal Reserve Bank of New York President Timothy Geithner

And in the next article...

"I believe we are facing the most serious...economic and financial stresses that the U.S. has faced in at least a generation -- and possibly much longer," Lawrence Summers, who was Treasury secretary during the Clinton administration, said Friday at a Stanford University conference. "We are in nearly unprecedented territory with respect to financial strain."

How You Should Move Forward
We are actively advising our clients to stick to the plan. Continue watching cash flow. Keep an eye on your costs. The price of food and fuel are rapidly rising and must be accounted for in your monthly budget. Ultimately, you must remain prudent, focused, and educated. Read the newspaper. Stay informed of current national events as they will now--more than ever--affect us all.

Insuring a condo or co-op is a little different from insuring a typical home because you don't own the entire building. Usually, two policies are involved: the master policy provided by the condo association or co-op board, and your individual policy, which is typically written on a standard homeowners form (known as Form HO-6). If you know what the master policy covers and purchase individual coverage to fill in the gaps, you should have the protection you need.

The Master Policy
The common areas you share with other owners should be covered by a master policy. These areas usually include the roof, stairways, elevators, and basement. If physical damage occurs to these areas, the repairs are covered under the master policy's provisions. The master policy also offers protection for liability incurred in the common areas. This means that if your guest or another person suffers a bodily injury while in a common area, the insurance company will step in to defend you and the other unit owners in the event of a lawsuit. Also make sure that the master policy provides broad coverage.

Additional Coverage for Improvements
It is important for you to know exactly what the master policy covers in order for you to purchase appropriate individual coverage for your unit and its contents. For instance, the master policy may cover individual units as they were originally built, but not improvements you have made to your property. You may need to buy an endorsement to cover any additions and improvements. A typical personal condo or co-op policy covers your personal property and other property, including private balconies, private entranceways, private garages, and other property that is your insurance coverage responsibility under your condo or co-op agreement.

What Your Personal Policy Will (and Will Not) Cover
Although the liability coverage on Form HO-6 is similar to that found in other homeowners policies, the property coverage is less comprehensive than that under the HO-3 form. This policy covers only the physical damage to your property and possessions caused by:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil disturbance
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Broken glass
11. Volcanic eruption
12. Falling objects
13. Weight of ice, snow, or sleet
14. Accidental discharge or overflow of water
15. Sudden and accidental tearing apart
16. Freezing
17. Artificially generated electrical charge

Certain perils specifically not covered are listed in the exclusions section of your policy. These typically include damage due to:

1. Enforcement of building codes
2. Earthquakes
3. Flooding
4. Power failures
5. Neglect
6. War
7. Nuclear hazard
8. Intentional acts

Loss Assessment
Check your personal policy and pay particular attention to the paragraph titled Loss Assessment. This paragraph entitles you to collect up to $1,000 for loss assessments charged to you by the condo or co-op association. Loss assessments typically result from losses suffered by the condominium or co-op as a whole, such as damage to a roof that is not covered by the master policy at all or is subject to a large deductible. These uninsured damages are then passed through to all unit owners.

Loss Settlement
Your policy will specify the amounts you can recover in the event of a loss. Depending on the provisions of your personal policy, your insurance company may pay the total replacement cost of your property, which would allow you to replace or repair your lost or damaged items. Or, you may receive only the actual cash value (ACV) of your property, which is generally the current fair market value or the property's purchase price minus depreciation. Your settlement will almost always be less under the ACV method. Also, certain property items are assigned a specific dollar value for loss purposes, no matter what its age or condition. Loss settlement is always subject to the coverage limits described in your policy.

Read Your Policy Before Making a Claim
To qualify for payment from your insurance company, you must meet the conditions spelled out in your homeowners policy. Some conditions dictate your responsibilities before a loss occurs, and some dictate the actions you must take after the loss to remain eligible for coverage. Read your policy carefully to familiarize yourself with your responsibilities. If you need assistance, consult your agent to go over the details in your policy. Be sure you use an agent who is knowledgeable about condo and co-op policies.

Coordination of Benefits Under the Master Policy and Personal Policy
When a loss is covered by both the condominium's or co-op's master insurance policy and your individual policy, your homeowners insurance will pay only for the balance of the loss that remains after the master insurance policy pays 100 percent of its limit.

Today's teens have more money to spend and more opportunities to spend it, and if they're not careful, they can easily get into financial trouble. Before it happens to your child, help him or her learn a few financial lessons.

Last month, we discussed surefire ways for parents to introduce younger children to the world of personal finance. But teenagers can be an entirely different challenge. Here are a few of our best tips for you parents who need some help breaking the ice...

Earning Wages
If you think your teen is ready, encourage him or her to get a part-time job. Here are some things to discuss once your teen begins working:

• Agree on what your child's pay should be used for
• Show your teen how taxes reduce take-home pay
• Open a checking account and a savings account, and encourage him or her to save a portion of every paycheck before spending any of it

Keeping a Balanced Budget
To develop a balanced budget, have your teen list all his or her income. Next, list common expenses, such as food and gas (don't include things you will pay for). Finally, subtract the expenses from the income. If the results show that your teen will be in the red, you'll need to come up with a plan to address the shortfall. To help your teen learn about budgeting:

• Devise a system for keeping track of what's spent
• Suggest thinking through spending decisions rather than buying on impulse
• Categorize expenses as needs (unavoidable) and wants (that can be reduced)
• Suggest ways to increase income (like doing extra chores) and/or reduce expenses

The Future is Now
An older teen should be ready to focus on saving for future goals, both larger (e.g., a new computer or a car) longer-term (e.g., college, an apartment). Here are some ways to encourage saving:

• Have your teen put the goals in writing to make them more concrete
• Encourage your child to save for what he or she wants, not what other kids have
• Praise your child for showing responsibility in meeting a goal

To introduce your teen to investing, open an investment account for him or her. (If your teen's a minor, this must be a custodial account.) Look for an account that can be opened with a low initial contribution at an institution that supplies educational materials about basic investment terms and concepts.

Should You Give the Kid Credit?
If your teen is responsible, you might consider getting him or her a credit card to begin establishing a positive credit history. Most major credit card companies require an adult to cosign a credit card agreement before they will issue a card to someone under the age of 18. Ask the credit card company for a low credit limit (e.g., $300) or a secured card. This can help your child learn to manage credit without getting into serious debt. Also:

• Set limits with your teen on the card's use
• Make sure your child understands the grace period, fee structure, and how interest accrues on the unpaid balance
• Agree on how the bill will be paid, and what will happen if your child can't pay the bill
• Make sure your child understands how long it will take to pay off a credit card balance if he or she only makes minimum payments

On January 28, 2008, President Bush signed into law the National Defense Authorization Act for fiscal year 2008. Among other things, the Act amends the Family and Medical Leave Act of 1993 (FMLA) to permit a "spouse, son, daughter, parent, or next of kin to take up to 26 weeks of leave to care for a member of the Armed Forces (including a member of the National Guard or Reserves) who is undergoing medical treatment, recuperation, or therapy, is otherwise in outpatient status, or is otherwise on the temporary disability retired list, for a serious injury or illness."

Specifically, the law permits:

1. Up to 26 weeks of leave in a one-time 12-month period to care for a service member with a "serious illness" who is injured in the line of active duty, effective immediately
   
   
2. Up to 12 weeks of leave in any 12-month period for a "qualifying exigency" related to a service member's call to active duty. What constitutes a "qualifying exigency" will be defined shortly by the Department of Labor.

We Are the Military's Preferred Provider for Financial Planning Services
During the past four years, the Garrett Planning Network has enjoyed a unique partnership with the Military Officers Association of America (MOAA).

“There are many different financial companies in the business of providing financial advice including brokerages, insurance companies, wealth management firms and fee-only financial planners,” said a 2004 MOAA Member Services Update that went out to MOAA’s 130,000 members. “Each of these approaches has advantages and disadvantages. But, after considerable research we feel that the fee-only model is best suited for MOAA, and that the Garrett Planning Network is the organization best suited to provide this service.”

Sheryl Garrett, founder of the Garrett Planning Network added, “The alliance gives MOAA a place to direct people who need high-quality, reasonably-priced advice in their best interests. We have provided intensive training so that the participating Garrett planners may more fully understand the unique challenges faced by active duty, National Guard/Reserve and retired officers and their families."

Serving Those Who Serve Us All
As a proud member Garrett Planning Network, Lightship Mutual is pleased and honored to work with the families and communities who support the mission and values of the MOAA. As such, we proudly offer a 20% discount to all MOAA members. As with all of our clients, we welcome members' questions and financial concerns regardless of yearly income or net worth.

Life's major decisions have a lasting impact, and important financial concerns are often overlooked during this annual holiday of love and consumption. But during this Valentine's Day, spend a moment thinking about all of your loved ones who are:

• Graduating from college
• Starting a career
• Getting married
• Having a new baby
• Changing jobs
• Nearing retirement

Gift Differently
Offer your friends and family something more meaningful. Give them peace of mind and the opportunity to secure a positive financial future. For the recipient, there are no products to buy and no accounts to set up; just the time and expertise of a qualified financial advisor to help steer them onto the correct financial course.

A certificate for one or two hours of time is ideal, and the session can either be tightly focused or a less formal "rapid fire" style Q&A session covering multiple topics.
Our most common concerns with gift recipients often include:

• Debt and credit management and repair
• Allocating retirement plan contributions among investment choices
• Estimating college education expenses, and how to fund them
• Developing a spending and savings plan
• Obtaining a second opinion on an investment portfolio
• Making a pension lump sum decision
• Deciding how much and what type of insurance to buy

Contact us to learn more and to obtain gift certificates for your loved ones today.

So you're going to have or adopt a baby. Congratulations! Parenthood may be one of the most rewarding experiences you'll ever have. As you prepare for life with your baby, here are a few things you should think about.

1. Reassess Your Budget
You'll have to buy a lot of things before (or soon after) your baby arrives, and keeping track of your spending can be tough. A new crib, stroller, car seat, and other items could cost you well over $1,000. But if you do your homework, you can save money without sacrificing quality and safety. Discount stores or Internet retailers may offer some items at lower prices than you'll find elsewhere. If you don't mind used items, poke around for bargains at yard sales, flea markets, and Craigslist.com. Finally, you'll probably get hand-me-downs and shower gifts from family and friends, so some items will be free.

Buying all of the gear you need is pretty much a one-shot deal, but you'll also have many ongoing expenses that will affect your monthly budget. These may include baby formula and food, diapers, clothing, child care (day care and/or baby-sitters), medical costs not covered by insurance (such as co-payments for doctor's visits), and increased housing costs (if you move to accommodate your larger family, for example). Redo your budget to figure out how much your total monthly expenses will increase after the birth of your baby. If you've never created a budget before, now is the time to start. Chances are, you'll be spending at least an extra few hundred dollars a month. If it looks like the added expenses will strain your budget, you'll want to think about ways to cut back on your expenses.

2. Decide if Someone Should Stay at Home
Will it make sense for both of you to work outside the home, or should one person stay home? That's a question only you and your partner can answer. Maybe both of you want to work because you enjoy your jobs. Or maybe you have no choice if the only way you can get by financially is for both of you to work. But don't be too hasty--the financial benefits of two incomes may not be as great as you think. Remember, you may have to pay for expensive day care if both of you work. You'll also pay more in taxes because your household income will be higher. Finally, the working partner will have commuting and other work-related expenses. Run the numbers to see how much of a financial benefit you really get if both of you work. Then, weigh that benefit against the peace of mind you would get from having one partner stay home with the baby. A compromise might be for one of you to work only part-time.

3. Review Your Insurance Needs
You'll incur high medical expenses during the pregnancy and delivery, so check the maternity coverage that your health insurance offers. And, of course, you'll have another person to insure after the birth. Good medical coverage for your baby is critical, because trips to the pediatrician, prescriptions, and other health-care costs can really add up over time. Fortunately, adding your baby to your employer-sponsored health plan or your own private plan is usually not a problem. Just ask your employer or insurer what you need to do (and when, usually within 30 days of birth or adoption) to make sure your baby will be covered from the moment of birth. An employer-sponsored plan (if available) is often the best way to insure your baby, because these plans typically provide good coverage at a lower cost. But expect additional premiums and out-of-pocket costs (such as co-payments) after adding your baby to any health plan.

It's also time to think about life insurance. Though it's unlikely that you'll die prematurely, you should be prepared anyway. Life insurance can protect your family's financial security if something unexpected happens to you. Your beneficiary can use the death benefit to pay off debts (e.g., a mortgage, car loan, credit cards), support your child, and meet other expenses. Some of the funds could also be set aside for your child's future education. If you don't have any life insurance, now may be a good time to get some. The cost of an individual policy typically depends on your age, your health, whether you smoke, and other factors. Even if you already have life insurance (through your employer, for example), you should consider buying more now that you have a baby to care for. A qualified financial professional can help you figure out how much coverage you need.

4. Update Your Estate Plan
With a new baby to think about, you and your partner should update your trusts and wills (or prepare wills, if you haven't already) with the help of an attorney. You'll need to address what will happen if an unexpected tragedy strikes. Who would be the best person to raise your child if you and your partner died at the same time? If the person you choose accepts this responsibility, you'll need to designate him or her in your wills as your minor child's legal guardian. You should also name a contingent guardian, in case the primary guardian dies. Guardianship typically involves managing money and other assets that you leave your minor child. You may also want to ask your attorney about setting up a trust for your child and naming trustees separate from the suggested guardians.

While working with your attorney, you and your partner should also complete a health-care proxy and durable power of attorney. These documents allow you to designate someone to act on your behalf for medical and financial decisions if you should become incapacitated.

5. Start Saving for Your Little One's Education
The price of a college education is high and keeps getting higher. By the time your baby is college-bound, the annual cost of a good private college could be almost triple what it is today, including tuition, room and board, books, and so on. How will you afford this? Your child may receive financial aid (e.g., grants, scholarships, and loans), but you need to plan in case aid is unavailable or insufficient. Set up a college fund to save for your child's education--you can arrange for funds to be deducted from your paycheck and invested in the account(s) that you choose. You can also suggest that family members who want to give gifts could contribute directly to this account. Start as soon as possible (it's never too early), and save as much as your budget permits. Many different savings vehicles are available for this purpose, some of which have tax advantages. Talk to a financial professional about which ones are best for you.

6. Pay Attention to Your Taxes
There's no way around it: Having children costs money. However, you may be entitled to some tax breaks that can help defray the cost of raising your child. First, you may be eligible for an extra exemption if your annual income is below a certain level for your filing status. This will reduce your income tax bill for every year that you're eligible to claim the exemption. You may also qualify for one or more child-related tax credits: the child tax credit (a $1,000 credit for each qualifying child), the child and dependent care credit (if you have qualifying child-care expenses), and the earned income credit (if your annual income is below a certain level). To claim any of these exemptions and credits on your federal tax return, you'll need a Social Security number for your child. You may be able to apply for this number (as well as a birth certificate) right at the hospital after your baby's birth.

For more information about tax issues, talk to a tax professional.

Ask your five-year old where money comes from, and the answer you'll probably get is "From a machine!" Even though children don't always understand where money really comes from, they realize at a young age that they can use it to buy the things they want. So as soon as your child becomes interested in money, start teaching him or her how to handle it wisely. As we stress with our five Keys to SHINE™, it is critical to give your child a solid foundation for a lifetime of informed financial decisions.

Lesson 1: Learn to Handle an Allowance
An allowance is often a child's first brush with financial independence. With allowance money in hand, your child can begin saving and budgeting for the things he or she wants.

It's up to you to decide how much to give your child based on your values and family budget, but a rule of thumb used by many parents is to give a child 50 cents or 1 dollar for every year of age. To come up with the right amount, you might also want to consider what your child will need to pay for out of his or her allowance, and how much of it will go into savings.

Some parents ask their child to earn an allowance by doing chores around the house, while others give their child an allowance with no strings attached. If you're not sure which approach is better, you might want to compromise. Pay your child a small allowance, and then give him or her the chance to earn extra money by doing chores that fall outside of his or her normal household responsibilities.

If you decide to give your child an allowance, here are some things to keep in mind:

• Set some parameters. Sit down and talk to your child about the types of purchases you expect him or her to make, and how much of the allowance should go towards savings.
• tick to a regular schedule. Give your child the same amount of money on the same day each week.
• Consider giving an allowance "raise" to reward your child for handling his or her allowance well.
  

Lesson 2: Open a Bank Account
Taking your child to the bank to open an account is a simple way to introduce the concept of saving money. Your child will learn how savings accounts work, and will enjoy trips to the bank to make deposits.

Many banks have programs that provide activities and incentives designed to help children learn financial basics. Here are some other ways you can help your child develop good savings habits:

• Help your child understand how interest compounds by showing him or her how much "free money" has been earned on deposits.
• Offer to match whatever your child saves towards a long-term goal.
• Let your child take a few dollars out of the account occasionally. Young children who see money going into the account but never coming out may quickly lose interest in saving.
  

Lesson 3: Set and Save for Financial Goals
When your children get money from relatives, you want them to save it for college, but they'd rather spend it now. Let's face it: children don't always see the value of putting money away for the future. So how can you get your child excited about setting and saving for financial goals? Here are a few ideas:

• Let your child set his or her own goals (within reason). This will give your child some incentive to save.
• Encourage your child to divide his or her money up. For instance, your child might want to save some of it towards a long-term goal, share some of it with a charity, and spend some of it right away.
• Write down each goal, and the amount that must be saved each day, week, or month to reach it. This will help your child learn the difference between short-term and long-term goals.
• Tape a picture of an item your child wants to a goal chart, bank, or jar. This helps a young child make the connection between setting a goal and saving for it.

Finally, don't expect a young child to set long-term goals. Young children may lose interest in goals that take longer than a week or two to reach. And if your child fails to reach a goal, chalk it up to experience. Over time, your child will learn to become a more disciplined saver.

Lesson 4: Become a Smart Consumer
Commercials. Peer pressure. The mall. Children are constantly tempted to spend money but aren't born with the ability to spend it wisely. Your child needs guidance from you to make good buying decisions. Here are a few things you can do to help your child become a smart consumer:

• Set aside one day a month to take your child shopping. This will encourage your child to save up for something he or she really wants rather than buying something on impulse.
• Just say no. You can teach your child to think carefully about purchases by explaining that you will not buy him or her something every time you go shopping. Instead, suggest that your child try items out in the store, then put them on a birthday or holiday wish list.
• Show your child how to compare items based on price and quality. For instance, when you go grocery shopping, teach him or her to find the prices on the items or on the shelves, and explain why you're choosing to buy one brand rather than another.
• Let your child make mistakes. If the toy your child insists on buying breaks, or turns out to be less fun than it looked on the commercials, eventually your child will learn to make good choices even when you're not there to give advice.

For many parents, returning to work after a child birth is stressful. Ultimately when you begin looking for child care, concerns revolve around how to locate affordable, quality care. You question whether you are making the right choice, whether you can actually afford to stay at home with your child, and are taking a leap of faith in placing your child's welfare in the hands of strangers.

How Much Does Child Care Cost?
As we talk to our clients, we hear a wide range of prices. But one thing remains constant: The cost of child care will depend upon where you live, how old your children are, how many children you have in day care, and what type of child care you choose.

You'll Likely Pay Different Amounts for Children of Different Ages
In general, the younger the child, the more you'll pay for child care. If you've been looking for someone to take care of your baby, you've probably already experienced sticker shock. The law in many states mandates that child-care centers have one adult for every four infants. This means that the centers must hire more people (or accept fewer infants for care) and this increases the price of care. In addition, caring for infants is labor-intensive, so if you hire a nanny, you may need to pay him or her more to care for an infant.

You'll Pay more for Two Children, but Not Twice as Much
You'll pay more for child care for two children, but not usually twice as much. Many child-care centers (and family day-care providers) will give you a sibling discount for the second child if you enroll both of them. If you hire a nanny, he or she may charge you the same amount for one child as for two. In fact, some families opt to hire a nanny after their second or third child is born because it's suddenly cost-effective to do so; other families (such as neighbors) share a nanny and split the cost.

You'll Pay More for Certain Types of Care
In general, child care provided by a nanny is more expensive than child care provided by a day-care center. Child care provided by a day-care center is usually more expensive than family day care. However, you may find that this really isn't so in your area, because costs vary widely from region to region. In addition, some day-care costs may be subsidized by the government or by your employer, and some providers simply charge less than others. There's not necessarily a correlation between price and quality, either. For instance, a day-care center may charge more because it has a lot more overhead than a family day-care provider, but the family day-care provider may provide care that is just as good as (and sometimes better than) the care at the child-care center.

The Total Cost of Child Care
Many parents who work and pay for child care wonder if it's worth it to work at all, because child-care costs eat up a big portion of their paycheck (particularly if they have more than one child). This is particularly true in families where the second wage earner's salary is relatively low. However, many parents have no choice. Single parents, for instance, usually must work, and both parents in a two-parent family often have to work to make ends meet. If you do have a choice, though, you may want to consider what child care actually costs you. For instance, you must pay:

• The monthly check to your provider
• The cost in transportation to and from the provider
• Incidental costs of using a child-care center (such as food and sick child-care costs)
• If you've hired a nanny, the legal costs involved and the extra tax obligations; see the section on in-home care for these costs
• The costs of going to work: transportation, clothes, incidentals
• If you've hired a nanny, the costs of their upkeep in your home

Example(s): Teresa went back to work after the birth of her twins. Her monthly paycheck was $2,250, and she paid her child-care provider $900 per month for day care for both children. In addition, she had to buy a used car to get back and forth from work every day and paid $200 a month for her car payment, gas, and insurance. She also spent $75 a month on clothing and another $75 a month on lunches and coffee. So, after considering the total cost of working, Teresa was keeping only $1,000, or 44 percent of her take-home pay.

The Benefits of Working
For you as the parent, the satisfaction and commitment you feel to your job may make working worth the cost, even if you barely make a profit. If you've spent years preparing to be a research physicist, you may not want to give up your lab and your tenure to care for your child on a full-time basis. You may value your career advancement at the law firm and expect that dropping out for a three- or four-year period will hamper your chances to make partner. Most important, your job may be so exciting and stimulating that you feel dissatisfied when you're not working.

Financial Aid from the Government and Your Employer
Are you eligible for government-subsidized child care? The 1997 Welfare Reform Act shifted most of the distribution of federal child-care dollars to state agencies, so you'll have to check with your own state to see if you can qualify.

If you meet eligibility requirements, another way the government helps you defray the cost of child care is through the child-and dependent-care tax credit, which reduces your total tax liability by allowing you to take a credit for part of your child-care expenses. Your employer may help you out with child care, too, either by sponsoring a child-care program or by allowing you to contribute pretax dollars to a dependent-care account to fund some of your child-care expenses.

Tip: If you exclude contributions to a dependent-care account from your income, then you cannot include the excluded benefits in your expenses for purposes of calculating the credit. In addition, the excluded benefits may also reduce or eliminate the amount of credit for which you qualify.

Alternative Work Schedules May Reduce Child-Care Costs
You might be able to reduce the size of the check that you write to your child-care provider by changing your work schedule. If you can devise a way to work different hours, you may be able to share child care with another adult so your dollar outlay is lower. Here are scheduling options you can pass by the boss:
Parental and maternity leave

Both Dad and Mom may be eligible for family leave after their child is born. This means that you get some time off to recover from the birth and to care for your new baby. Some companies give as much as three months of this family leave at full pay, and then another three months at half pay, although this is relatively rare. If your company doesn't offer paid family leave, you may be able to take up to 12 weeks of unpaid leave after your child is born (or after you adopt a child) under the Family and Medical Leave Act of 1993. Check with your employer.

Flex Time
Flex time lets you change your arrival and departure times at the office. As long as you're on the site during the core hours, your employer may let you come into work earlier or later than would normally be required, as long as the total number of hours you spend at work remains the same. Flex-time arrangements are becoming increasingly common in areas where traffic tie-ups are common and in industries where attracting and retaining good employees is a top priority.
Flex place

Flex place is telecommuting, or doing your job from home using your computer, your phone, and your fax machine. Everyone flirts with telecommuting whenever a blizzard rolls in, but you can use the system to stay home with your children on a more regular basis. Of course, if your children want to sit on your lap while you're typing, you may not work very efficiently. But you may be able to minimize distractions by working during their nap time, after they're in bed, or before they get up. If all else fails, you may be able to hire the teenager across the street to entertain them after school, or you may be able to put them in part-time day care.

Job Sharing
If you job share, you and at least one other person share the duties of one full-time job. You're basically working part-time, but job sharing may still give you insurance benefits. You'll also be able to keep up with the developments in your field and enjoy the stimulation of the workplace without going in to the office every day. Job sharing requires coordination between you and your partner, and the company has to approve of the idea. But it will also make it much easier for you if your child gets the flu.
Compressed work week

Some parents like to compress their work week by working 10 hours a day for four days and having the fifth day off. You're still putting in your 40-hour week and earning 40 hours of pay, but you have one day off. If you can work it out with your employer and your child-care provider, you'll save on child care and be able to handle your personal business as well. This kind of schedule is especially helpful if you commute a long distance to work and that time is built into your child-care costs.

Part-Time Employment
While your child is in diapers, you may decide to opt for part-time employment. You'll make a part-time check and hand much of it to your provider, but you'll stay in the game and keep the stimulation of the workplace.
Voluntary reduced work time

If child care is too expensive or you're eager to stay home with your child, ask your boss about voluntarily reducing your work time. If you work more than 50 percent of your job for at least a year, you may be able to keep your insurance benefits and seniority and still stay home with your child part-time. These arrangements may not work out on a permanent basis, especially if your company really must have an employee around full-time to get the job done, but they allow you to make an easier transition back to work after your child is born.

Other Ways to Reduce Child-Care Costs
Probably the easiest way to lower your child-care costs is to find a less-expensive provider. If your child is already spending several hours a day in a preschool setting, you may be able to combine this care with a home provider and not use a nanny. If the private day-care center is too expensive, check on family day care.

Is There a Relative or Close Friend Who Will Watch Your Child?
If it takes a village to raise a child, where are the villagers who are eager to take care of your child so that you can go to the office? Sometimes you'll find a grandmother, aunt, or friend who is thrilled to take care of your baby. This usually is the cheapest child care around, but it has other, more implicit costs. First of all, Grandma has already raised one family. Consider the possibility that she may be more eager to work in her garden than watch your child all day. And what if your child-rearing philosophies don't match? How will you negotiate your differences?
Share care with a neighbor or friend

You and your close friend or neighbor may be able to hire one child-care provider and share him or her. This means that your neighbor's child is always in "child care" at your house or your child goes to your neighbor's house for child care. The caregiver stays the same, but the children either move between the two houses or use one. This arrangement can ensure that both your and your neighbor's child will get lots of attention, but the home base of your "center" may also get lots of wear and tear. You also need to be sure that you agree on your child-raising philosophy.

If Your Child is in a Child-Care Center, See if You Can Trade Time for Dollars
You may be able to work early or late hours in the center to save some money on your child's tuition. Especially in community centers, these arrangements are possible. The center needs parental help to meet its ratios and keep its programs running, and you get to save a few dollars a week in child-care costs by giving them time instead of cash.

Try a Swing Shift with Another Adult
If you and your child's other parent work different hours, you may be able to adjust your schedules so your child never goes to day care. However, using a swing shift means you and your partner will rarely see each other, since you're always working and sleeping different shifts. Nevertheless, this sometimes works well when both parents have jobs with flexible schedules.

The Mortgage Forgiveness Debt Relief Act of 2007 (the Act) was passed by Congress on December 18, 2007, and was signed into law by President Bush on December 20, 2007. The primary objective of this new law is to help beleaguered homeowners avoid foreclosure by eliminating the adverse federal tax consequences associated with debt forgiveness. The Act also extends the deduction for mortgage insurance premiums through 2010, expands the time period for a surviving spouse to use the higher home sale exclusion, and excludes from income certain state and local tax breaks given to volunteer emergency responders.

Foreclosure Relief
Generally, amounts of a debtor that are discharged are included in gross income. The Act generally allows taxpayers to exclude up to $2 million ($1 million if married filing separately) of mortgage debt forgiveness on their principal residence.

• Principal residence indebtedness includes indebtedness (for first, second, and home equity loans) that is incurred in the acquisition, construction, or substantial improvement of an individual's principal residence and that is secured by the residence. It includes refinancing of debt to the extent the amount of the refinancing doesn't exceed the amount of the refinanced indebtedness.
• The basis of the taxpayer's principal residence is reduced by the excluded amount, but not below zero.
• The exclusion doesn't apply to the discharge if the discharge is on account of services performed for the lender, or any other factor not directly related to a decline in the value of the residence or to the taxpayer's financial condition. The exclusion also doesn't apply to a taxpayer in a Title 11 bankruptcy.
• This provision is effective for indebtedness discharged on or after January 1, 2007 and before January 1, 2010.

Extension of Deduction for Mortgage Insurance Premiums Paid
Premiums paid or accrued by a taxpayer during 2007 for qualified mortgage insurance in connection with acquisition indebtedness with respect to a qualified residence of the taxpayer are treated as deductible qualified residence interest (subject to a phase-out based on the taxpayer's AGI). The Act extends the rules treating qualified mortgage insurance premiums as deductible qualified residence interest for three years.

• This provision is effective for amounts that: (1) are paid or accrued after December 31, 2007 and before January 1, 2011; (2) aren't properly allocable to any period after December 31, 2010; and (3) are paid or accrued with respect to a mortgage insurance contract issued after December 31, 2006.

Modification of Exclusion of Gain on Sale of Principal Residence
A qualifying taxpayer may exclude up to $250,000 ($500,000 for joint return filers) of gain from the sale or exchange of property that the taxpayer has owned and used as his or her principal residence. Married taxpayers filing jointly for the year of sale may exclude up to $500,000 of gain if: (1) either spouse owned the home for at least 2 of the 5 years before the sale, (2) both spouses used the home as a principal residence for at least 2 of the 5 years before the sale, and (3) neither spouse is ineligible for the full exclusion because of the once-every-2-year limit on the exclusion.

• Prior to the Act, the maximum $500,000 exclusion was available only if a husband and wife filed a joint return for the year of sale. If the home was sold in a year after the year of a spouse's death, the surviving spouse could only get a maximum exclusion of $250,000.
• The Act allows surviving single spouses to qualify for the maximum $500,000 exclusion if the sale occurs not later than 2 years after their spouse's death and the requirements for the $500,000 exclusion were met immediately before the spouse's death.
• This provision is effective for sales and exchanges after December 31, 2007.

New Exclusion for Volunteer Emergency Responders
Generally, reductions or rebates of property taxes by state or local governments on account of services performed by members of qualified volunteer emergency response organizations are taxable income to the volunteers.

• The Act provides an exclusion from gross income to members of qualified volunteer emergency response organizations for:
  1. any "qualified state or local tax benefit"; and
  2. any "qualified payment"
• A "qualified state or local tax benefit" is any reduction or rebate of state or local income, real property, or personal property taxes on account of services performed by individuals as members of a qualified volunteer emergency response organization. To avoid a double tax benefit, the amount of state or local taxes taken into account by a taxpayer in determining his deduction for taxes is reduced by the amount of any qualified state or local tax benefit.
• A "qualified payment" is a payment that is provided by a state or political subdivision on account of the performance of services as a member of a "qualified volunteer emergency response organization". The amount of these payments is limited to $30 multiplied by the number of months during the year that the taxpayer performs such service (therefore, the maximum exclusion in a given year is $360 ($30 x 12 months)).
• A "qualified volunteer emergency response organization" is any volunteer organization which is: (1) organized and operated to provide firefighting or emergency medical services for persons in the state or its political subdivision; and (2) required, by written agreement, by the state or political subdivision to furnish firefighting or emergency medical services in the state or political subdivision.
• This provision is effective for tax years beginning after December 31, 2007 and before January 1, 2011.

As the holiday season and the close of the year quickly approach, you may be planning to make gifts to family, friends, and charities. You can be generous to yourself, too, by making those gifts in a way that maximizes your tax benefits. Here are some tips for tax-wise giving.

Giving to Family and Friends
Gifts to family and friends may be subject to federal gift tax (and perhaps state gift tax), and gifts to grandchildren may also be subject to generation-skipping transfer tax (GSTT). However:

• Gifts to spouses are gift tax free.
• Currently, you can give tax free up to $12,000 per recipient ($24,000 if the gift is from both you and your spouse) under the annual gift tax exclusion. Gifts over that amount are tax free to the extent of your $1 million lifetime gift tax exemption ($2 million lifetime GSTT exemption).
• If you fund a 529 plan for your child or grandchild, you can contribute up to five years' worth of gifts at once; that's $60,000 per child or $120,000 if you and your spouse make the gift.
• You can make unlimited tax-free gifts if you directly pay medical bills or college tuition on behalf of a recipient.

Giving to Charity
Donations to charity are completely gift tax free and are also generally deductible for income tax purposes, subject to the usual limitations. However:

• Only donations to "qualified" organizations are tax deductible. IRS Publication 78, available online and at many public libraries, lists most organizations that are qualified to receive deductible contributions, or you can ask the organization for a copy of its tax-exempt status determination letter. In addition, churches, synagogues, temples, mosques, and government agencies are eligible to receive deductible donations.
• Avoid giving cash, and keep records (receipts, canceled checks) of all your donations, regardless of the amount. Although the value of your time serving as a volunteer is not deductible, out-of-pocket expenses (including transportation costs) directly related to your volunteer service to a charity are usually deductible.
• You must obtain a "qualified appraisal" for donations of property worth over $5,000 (other than cash and publicly traded securities), and you must attach an appraisal summary (IRS Form 8283) to your tax return.
• Donated clothing and household items must be in good condition. You may claim a deduction of more than $500 for any single item, regardless of its condition, if you include a qualified appraisal with your return.
• For 2007, an IRA owner age 70½ or older can directly transfer income tax free up to $100,000 per year to an eligible charitable organization. You can take advantage of this provision regardless of whether you itemize your deductions.
• Consider donating appreciated securities that you've held for more than a year. You'll generally get a full fair market value deduction and avoid capital gains tax, too.
• Consider grouping donations and making gifts in alternate years to create a larger deduction and opportunity to itemize.

Concierge health care is a primary-care arrangement that requires you, the patient, to pay your physician an annual retainer fee (often over and above your health insurance premiums) in exchange for improved access and services.

Such retainer fees may range from a low of $1,500 to as much as $20,000 per year...the more you pay, the more services you get. In exchange, you receive same- or next-day appointments (with no reception-room waiting), extended office visits, 24/7 telephone and/or e-mail access to your doctor, and an annual intensive physical. For additional fees, higher benefits are also available; this includes house calls, home delivery of prescribed medications, and continuous personalized care. Your primary care doctor may even accompany you to appointments with specialists, and will coordinate your care even during hospital stays, rather than handing you over to the hospital's staff physicians.

In a concierge health-care plan, your doctor sees fewer patients (the average caseload is 300, compared to 2,500 for doctors in managed-care plans). While some concierge plans don't accept health insurance, most do. Whenever possible, your doctor will bill your health insurance provider (or Medicare) for payment for services provided.

However, most health insurance plans require participating doctors to accept the plan's rates as payment in full for the covered services, and Medicare generally prohibits doctors from charging Medicare recipients anything more than what Medicare pays. As a result, concierge health-care providers who participate in Medicare must be careful to charge annual retainer fees only for services health insurance or Medicare won't normally cover.

While concierge health care obviously has its perks, you should make sure you understand exactly what is covered by the annual retainer fee before you sign up for it.

Life's major decisions have a lasting impact, and important financial concerns are often overlooked when your loved ones are:

• Graduating from college
• Starting a career
• Getting married
• Having a new baby
• Changing jobs
• Nearing retirement

Holiday Differently
Offer your friends and family something more meaningful. Give them peace of mind and the opportunity to secure a positive financial future.

For the recipient, there are no products to buy and no accounts to set up; just the time and expertise of a qualified financial advisor to help steer them onto the correct financial course.

A certificate for one or two hours of time is ideal, and the session can either be tightly focused or a less formal "rapid fire" style Q&A session covering multiple topics.
Our most common concerns with gift recipients often include:

• Debt and credit management and repair
• Allocating retirement plan contributions among investment choices
• Estimating college education expenses, and how to fund them
• Developing a spending and savings plan
• Obtaining a second opinion on an investment portfolio
• Making a pension lump sum decision
• Deciding how much and what type of insurance to buy

Simply Wrap It, and You're Done
We will mail you a high-quality gift certificate that you can wrap and give to your loved one during the big event. The certificate fits inside of a standard envelope and includes space for your name and a personalized message for the recipient. As a bonus, if you already know what you want to say, just tell us and we'll happily print the message on the certificate for you.

Contact us to learn more and to purchase gift certificates for your loved ones today.

A record-keeping system is a systematic approach to retaining and filing documents in a way that makes them easy to find when needed, even if it's several years later. Record-keeping systems range from simple to elaborate and from basic to comprehensive. The ideal system is designed to fit your personal and family situation and lifestyle.

Good Record Keeping is Important
The most important thing to know about record keeping is that doing it well will save you a lot of time and money during your lifetime. Conversely, poor record keeping is sure to cost you in terms of money, time, and aggravation, perhaps dearly. For instance, assuming that you've been generally honest with the IRS, the only reason to fear a tax audit is that your records are incomplete or in disarray. If so, the IRS could find that you owe more tax than you paid. Insurance and legal claims frequently require supporting documents as well.

Record keeping is also important for estate planning purposes. After you pass away, your family and the executor of your estate will be grateful to find your records complete and in a meaningful order.

Decide What Your Record-Keeping System Will Include
The items you decide to retain in your record-keeping system will depend on several factors, including:

• Your personal and family situation
• The nature of your assets and investments
• Your household's number and type of income sources
• Your tolerance for risk
• The time you'll realistically devote to keeping records systematically

In addition to financial documents, you'll probably want your system to retain other types of important documents, such as insurance policies; health and employment records; property titles; certificates of birth, death, and citizenship; and product and service guarantees. Today, it is also common to videotape personal property for potential use as evidence in an insurance claim.

Create a System that Works Best for You
If throwing all your receipts, bills, and paycheck stubs into the proverbial shoe box until tax time is the best you can manage, then it will have to do. However, devising a systematic approach to retaining and filing your important documents will bring rewards you will appreciate in the future. If you can find little time for record keeping, then a simple system may be the answer. On the other hand, a more complex system that retains and files all potentially necessary documents on a weekly or monthly basis assures that when a need arises, you'll be able to retrieve whatever you need promptly and without fuss. You might view this as pay now or pay later.

Accessibility and Security Should Determine Where You Store Records
It is usually best to store original documents that you must or want to protect from harm in a safety-deposit box, typically rented at your local bank. This provides important protection against fire and theft. Keep a reference copy of the documents in your more readily accessible files and note on them the location of the originals.

Older files that will likely require infrequent access can be stored in any relatively secure place provided that they will not be prone to damage or destruction. Files pertaining to the last 6 to 12 months should be readily accessible.

Caution: Never store your will in a safety-deposit box unless you've left a copy elsewhere or you lease the box jointly. Otherwise, the box may be sealed at the time of your death, leaving your spouse or executor searching for another copy.

For the most part, the window of opportunity for 2007 tax year planning closes on December 31. Here are a few points to consider as you contemplate any year-end tax moves and then look forward to the 2008 tax year.

New Zero Percent Tax Rate
Currently, the maximum federal income tax rate for most long-term capital gains and qualifying dividend income is 15%. Individuals in the lowest two tax brackets receive the benefit of an even lower 5% maximum rate. Beginning January 1, 2008, however (and continuing through 2010), the maximum rate drops all the way to zero for individuals in the lowest two tax brackets.

This presents an important planning opportunity. Make year-end gifts (up to $12,000 per individual gift tax free) of appreciated assets to family members currently in the lowest two tax brackets, who would then be able to sell the assets after January 1, 2008 without any resulting federal income tax. There's one big catch, though: the new "kiddie tax" rules.

New "Kiddie Tax" Rules
Generally, the kiddie tax rules apply when a child has unearned annual income (e.g., interest, investment earnings, taxable gain resulting from the sale of an asset) exceeding $1,700 (in 2007).

In 2007, the kiddie tax rules apply to children under the age of 18. Beginning in 2008, however, the kiddie tax rules apply to children who are under age 19, and to full-time students under age 24. (There's an exception for any child who earns more than one-half of his or her own support.)

So, if you want to take advantage of the zero tax bracket in 2008 by transferring appreciated assets to a low-tax-bracket family member, make sure the kiddie tax rules won't apply. Otherwise, the resulting income--at least the portion that exceeds $1,700--will be taxed at your (presumably higher) tax rate, eliminating most or all of any potential tax savings. For the remainder of 2007, though, the old rules apply--a child who will reach age 18 by year end is able to sell appreciated assets and potentially pay tax on any resulting income at the (still low) 5% rate.

AMT Uncertainty
Legislation signed into law in early 2006 brought the most recent in a long series of temporary "fixes" for the alternative minimum tax (AMT), which continues to reach further into the ranks of middle-income families. This temporary fix, in the form of increased AMT exemption amounts, expired at the end of 2006. If Congress doesn't act, the number of taxpayers subject to AMT is projected to increase from 4.24 million in 2006 to 23.19 million in 2007 (Source: Joint Committee on Taxation, March 5, 2007). Some action regarding the AMT is likely, but the form it will take is uncertain, making it important to stay up to date on any new developments.

Other Important Considerations
Unless there is additional legislative action, 2007 is the last year that a taxpayer age 70½ or older is able to make charitable contributions of up to $100,000 directly from an IRA to a qualified charity.

• 2007 is also the last year for other deductions, including the option to deduct state and local general sales tax (instead of state and local income tax) and the above-the-line deduction for qualified higher education expenses.
• For small businesses, legislation this year increased the Section 179 expensing limits.

Talk to a Professional
A qualified financial professional can explain how these issues, and others, might affect your 2007 tax situation.

Nearly 45 million people today receive some form of Social Security benefits, including 90 percent of retired workers over age 65. But Social Security is more than just a retirement program. Its scope has expanded to include other benefits as well, such as disability, family, and survivor's benefits.

How Does Social Security Work?
The Social Security system is based on a simple premise: Throughout your career, you pay a portion of your earnings into a trust fund by paying Social Security or self-employment taxes. Your employer, if any, contributes an equal amount. In return, you receive certain benefits that can provide income to you when you need it most--at retirement or when you become disabled, for instance. Your family members can receive benefits based on your earnings record, too. The amount of benefits that you and your family members receive depends on several factors, including your average lifetime earnings, your date of birth, and the type of benefit that you're applying for.

Your earnings and the taxes you pay are reported to the Social Security Administration (SSA) by your employer, or if you are self-employed, by the Internal Revenue Service. The SSA uses your Social Security number to track your earnings and your benefits.

Finding out what earnings have been reported to the SSA and what benefits you can expect to receive is easy. Just check out your Social Security Statement, mailed by the SSA annually to anyone age 25 or older who is not already receiving Social Security benefits. You'll receive this statement each year about three months before your birthday. It summarizes your earnings record and estimates the retirement, disability, and survivor's benefits that you and your family members may be eligible to receive. You can also order a statement at the SSA website, at your local SSA office, or by calling (800) 772-1213.

Social Security Eligibility
When you work and pay Social Security taxes, you earn credits that enable you to qualify for Social Security benefits. You can earn up to 4 credits per year, depending on the amount of income that you have. Most people must build up 40 credits (10 years of work) to be eligible for Social Security retirement benefits, but need fewer credits to be eligible for disability benefits or for their family members to be eligible for survivor's benefits.

Your Retirement Benefits
If you were born before 1938, you will be eligible for full retirement benefits at age 65. If you were born in 1938 or later, the age at which you are eligible for full retirement benefits will be different. That's because full retirement age is gradually increasing to age 67.

But you don't have to wait until full retirement age to begin receiving benefits. No matter what your full retirement age, you can begin receiving early retirement benefits at age 62. Doing so is often advantageous: Although you'll receive a reduced benefit if you retire early, you'll receive benefits for a longer period than someone who retires at full retirement age.

You can also choose to delay receiving retirement benefits past full retirement age. If you delay retirement, the Social Security benefit that you eventually receive will be as much as 6 to 8 percent higher. That's because you'll receive a delayed retirement credit for each month that you delay receiving retirement benefits, up to age 70. The amount of this credit varies, depending on your year of birth.

Disability Benefits
If you become disabled, you may be eligible for Social Security disability benefits. The SSA defines disability as a physical or mental condition severe enough to prevent a person from performing substantial work of any kind for at least a year. This is a strict definition of disability, so if you're only temporarily disabled, don't expect to receive Social Security disability benefits--benefits won't begin until the sixth full month after the onset of your disability. And because processing your claim may take some time, apply for disability benefits as soon as you realize that your disability will be long term.

Family Benefits
If you begin receiving retirement or disability benefits, your family members might also be eligible to receive benefits based on your earnings record. Eligible family members may include:

• Your spouse age 62 or older, if married at least 1 year
• Your former spouse age 62 or older, if you were married at least 10 years
• Your spouse or former spouse at any age, if caring for your child who is under age 16 or disabled
• Your children under age 18, if unmarried
• Your children under age 19, if full-time students (through grade 12) or disabled
• Your children older than 18, if severely disabled

Each family member may receive a benefit that is as much as 50 percent of your benefit. However, the amount that can be paid each month to a family is limited. The total benefit that your family can receive based on your earnings record is about 150 to 180 percent of your full retirement benefit amount. If the total family benefit exceeds this limit, each family member's benefit will be reduced proportionately. Your benefit won't be affected.

Survivor's Benefits
When you die, your family members may qualify for survivor's benefits based on your earnings record. These family members include:

• Your widow(er) or ex-spouse age 60 or older (or age 50 or older if disabled)
• Your widow(er) or ex-spouse at any age, if caring for your child who is under under 16 or disabled
• Your children under 18, if unmarried
• Your children under age 19, if full-time students (through grade 12) or disabled
• Your children older than 18, if severely disabled
• Your parents, if they depended on you for at least half of their support

Your widow(er) or children may also receive a one-time $255 death benefit immediately after you die.

Applying for Social Security Benefits
You can apply for Social Security benefits in person at your local Social Security office. You can also begin the process by calling (800) 772-1213 or by filling out an on-line application on the Social Security website. The SSA suggests that you contact its representative the year before the year you plan to retire, to determine when you should apply and begin receiving benefits. If you're applying for disability or survivor's benefits, apply as soon as you are eligible.

Depending on the type of Social Security benefits that you are applying for, you will be asked to furnish certain records, such as a birth certificate, W-2 forms, and verification of your Social Security number and citizenship. The documents must be original or certified copies. If any of your family members are applying for benefits, they will be expected to submit similar documentation. The SSA representative will let you know which documents you need and help you get any documents you don't already have.

Liability insurance protects individuals and businesses in the event they're held financially responsible for injuring someone or causing property damage. You probably already have this important protection, but do you have enough?

Personal Liability Insurance
Despite the common belief that only people with substantial wealth or assets are the targets of lawsuits, that's not necessarily the case. Accidents can happen anywhere, to anyone, and even people of modest means may be at risk. For example, here are some common situations that might result in a liability claim:

• Your dog escapes from the house and bites a delivery person
• A neighbor's child is hurt while jumping on your backyard trampoline
• Your vehicle broadsides another, injuring the driver

Unfortunately, if you're sued, your assets are potentially at stake--your savings, your investments, and in most states, even your home. Even if the claim is eventually proved groundless and you're not held liable for damages, the cost of mounting a defense can be high.

That's why personal liability insurance is so important. Not only does it cover any court awards you're required to pay as a result of damage or injury caused by you, your family members, or your pets, but it also covers your legal bills, up to policy limits.

You Probably Already Have Some Coverage
Homeowners, renters, and auto policies all contain liability coverage, so you may already have a basic layer of protection. However, you may not have enough, especially if you have only the minimum required. For example, liability limits for homeowners insurance generally start at $100,000, while required minimum limits for auto insurance in most states range from $30,000 to $60,000. Often, you'll need far more liability coverage than this to adequately protect your assets.

Ask an insurance professional to review your liability limits and help you decide how much you need, based on factors such as your age, assets, income, and lifestyle.

If You Need More Coverage
What if you have the highest available coverage limits but you still need an additional layer of protection? Consider purchasing an excess liability policy, also called an umbrella liability policy. Because it offers higher coverage limits (often starting at $1 million) than basic personal liability insurance, an umbrella policy will cover you for larger losses.

You'll need to have a certain level of underlying liability coverage (generally between $100,000 and $500,000) in order to purchase an umbrella liability policy, because the umbrella coverage kicks in only after you've reached the limits of your underlying policy. For example, if you have an auto policy with a liability limit of $300,000 per accident and a $1 million umbrella policy, your auto policy would cover the first $300,000 of a $700,000 claim and your umbrella policy would cover the remaining $400,000.

Business and Professional Liability Insurance
The widely publicized case of a dry-cleaning business that was sued for $54 million over a lost pair of pants illustrates the importance of business liability protection. Although the owners of the business prevailed in the lawsuit and were awarded court costs (not including attorney's fees), they did not have liability coverage, and they may never recover the tens of thousands of dollars they spent mounting a two-year defense against this lawsuit.

While businesses can't always prevent such liability claims, they can purchase coverage for the special risks they face. One option is commercial general liability insurance, which is often part of a business owners policy. Business umbrella liability policies that offer higher liability limits are also available.

However, some liability risks are unique to certain businesses or professions, so you may also need specialized coverage. For example, if you work in an occupation that is particularly vulnerable to professional liability (e.g., law, medicine, day care), you may also need a separate professional liability policy, usually called malpractice coverage or errors and omissions coverage. Many other types of specialized liability coverage are also available.

Talk to an insurance professional who can help you determine the types and amounts of liability coverage that are appropriate for your business or profession.

As a young, educated individual, you certainly never expected divorce when you cut the wedding cake--all along, you've planned on spending the rest of your live with the same spouse. Unfortunately, the fairy tale didn't work out, and you're headed for a divorce. So where do you begin?

Divorce can be a lengthy process that will strain your emotional, psychological, and financial limits, and it will almost certainly leave you feeling out of control. But with the right preparation, you can protect your interests, take charge of your future, and save yourself time and money.

First Things First: Should You Hire an Attorney?
There's no legal requirement that you hire an attorney when divorcing. In fact, going it alone may be a sensible option if you're young and have been married only a short time, are childless, and have few assets. However, most divorcing couples hire attorneys to better protect their interests, even though doing so can be expensive. Divorce attorneys typically charge hourly rates and require you to submit retainers (lump sums) up front. It's not unusual, for example, for an attorney to charge as much as $150 to $200 per hour and require an initial retainer of up to $2,500 to $5,000. The fee depends on the complexity of the case, the reputation and experience of the divorce attorney, and your geographic location.

You should know that if you're a homemaker or earn less income than your spouse, it's still possible to obtain legal representation. You can submit a motion to the court, asking a judge to order your spouse to pay for your attorney's fees.

If you and your spouse can agree on most issues, you may save time and money by filing an uncontested divorce. If you can't agree on significant issues, you may want to meet with a divorce mediator, who can help you resolve issues that the two of you can't resolve alone. To find a mediator, contact your local domestic relations court, ask friends for a referral, or look in the telephone book. Certain attorneys, members of the clergy, psychologists, social workers, marriage counselors, and financial planners may offer their services as mediators.

Save Time and Money: Do Your Homework Before Meeting with a Divorce Professional
To save time and money, compile as much of the following information as you can before meeting with an attorney or other divorce professional:

• Each spouse's date of birth
• Names and birthdates of children, if you have any
• Date and place of marriage and length of time in present state
• Existence of prenuptial agreement
• Information about parties' prior marriages, children, etc.
• Date of separation and grounds for divorce
• Current occupation and name and address of employer for each spouse
• Social Security number for each spouse
• Income of each spouse
• Education, degrees, and training of each spouse
• Extent of employee benefits for each spouse
• Details of retirement plans for each spouse
• Joint assets of the parties
• Liabilities and debts of each spouse
• Life (and other) insurance of each spouse
• Separate or personal assets of each spouse, including trust funds and inheritances
• Financial records
• Family business records
• Collections, artwork, and antiques

If you're uncertain about some of these areas, you can obtain the necessary information through your spouse's financial affidavit and/or the discovery process, both of which are mandated by the court.

Consider the Big Questions, Such as Child Custody and Alimony
Although your divorce professional will help you work through the big issues, you might want to think about the following questions before meeting with him or her:

• If you have children, what are your wishes regarding custody, visitation, and child support?
• Whose health insurance plan should cover the children?
• Do you earn enough money to adequately support yourself, or should alimony be considered?
• Which assets do you really want, and which are you willing to let your spouse keep?
• How do you feel about the family home? Do you feel strongly about living there, or should it be sold or allotted to your spouse?
• Will you have enough money to pay the outstanding debt on whatever assets you keep?

In addition to an attorney, you may want to see a therapist to help you clarify your wishes, express yourself more clearly, and deal with any child-related issues. Such counseling is typically covered by health insurance.

Some General Dos and Don'ts

Keep the following tips in mind:

• Do prepare a budget and a financial plan to sustain you until your divorce is final. Get help if you don't currently have the skills and energy to do this on your own.
• Do review monthly bank and financial statements and make copies for your attorney.
• Do review all tax returns that have been filed jointly or separately by your spouse.
• Do make sure all taxes have been paid to date.
• Do review the contents of any safe-deposit boxes.
• Do get emotional support for yourself--talk to friends, join a support group, or see a therapist.
• Don't make large purchases or create additional debt that might later cause financial hardship.
• Don't quit your job.
• Don't move out of the house before consulting your attorney.
• Don't transfer or give away assets that are owned jointly.
• Don't sign a blank financial statement or any other document without reviewing it with your attorney.

Are health insurance premiums taking too big of a bite out of your budget? Do you wish you had better control over how you spend your health-care dollars? If so, you may be interested in an alternative to traditional health insurance called a health savings account (HSA).

How Does a Health Savings Account work?
An HSA is a tax-advantaged account that's paired with a high-deductible health plan (HDHP). Let's look at how an HSA works with an HDHP to enable you to cover your current health-care costs and also save for your future needs.

Before opening an HSA, you must first enroll in an HDHP, either on your own or through your employer. An HDHP is "catastrophic" health coverage that pays benefits only after you've satisfied a high annual deductible. (Some preventative care, such as routine physicals, may be covered without being subject to the deductible.) For 2007, the annual deductible for an HSA-qualified HDHP must be at least $1,100 for individual coverage and $2,200 for family coverage. However, your deductible may be higher, depending on the plan.

Once you've satisfied your deductible, the HDHP will provide comprehensive coverage for your medical expenses (though you may continue to owe co-payments or coinsurance costs until you reach your plan's annual out-of-pocket limit). A qualifying HDHP must limit annual out-of-pocket expenses (including the deductible) to no more than $5,500 for individual coverage and $11,000 for family coverage (for 2007). Once this limit is reached, the HDHP will cover 100% of your costs, as outlined in your policy.

Because you're shouldering a greater portion of your health-care costs, you'll usually pay a much lower premium for an HDHP than for traditional health insurance, allowing you to contribute the premium dollars you're saving to your HSA. Your employer may also contribute to your HSA, or pay part of your HDHP premium. Then, when you need medical care, you can withdraw HSA funds to cover your expenses, or opt to pay your costs out-of-pocket if you want to save your account funds.

An HSA can be a powerful savings tool. Because there's no "use it or lose it" provision, funds roll over from year to year. And the account is yours, so you can keep it even if you change employers or lose your job. If your health expenses are relatively low, you may be able to build up a significant balance in your HSA over time. You can even let your money grow until retirement, when your health expenses are likely to be substantial. However, HSAs aren't foolproof. If you have relatively high health expenses (especially within the first year or two of opening your account, before you've built up a balance), you could deplete your HSA or even face a shortfall.

HSA as a Tool for Tax Reduction

HSAs offer several valuable tax benefits:

• You may be able to make pretax contributions via payroll deduction through your employer, reducing your current income tax.
• If you make contributions on your own using after-tax dollars, they're deductible from your federal income tax (and perhaps from your state income tax) whether you itemize or not. You can also deduct contributions made on your behalf by family members.
• Contributions to your HSA, and any interest or earnings, grow tax deferred.
• Contributions and any earnings you withdraw will be tax free if they're used to pay qualified medical expenses.

Consult a tax professional if you have questions about the tax advantages offered by an HSA.

Can Anyone Open an HSA?

Any individual with qualifying HDHP coverage can open an HSA. However, you won't be eligible to open an HSA if you're already covered by another health plan (although some specialized health plans are exempt from this provision). You're also out of luck if you're 65 and eligible for Medicare or if you can be claimed as a dependent on someone else's tax return.

How Much Can I Contribute to an HSA?

Each year, you can contribute up to $2,850 for individual coverage and $5,650 for family coverage (for 2007). This limit applies to all contributions, whether they're made by you, your employer, or your family members. You can make contributions up to April 15th of the following year (i.e., you can make 2007 contributions up to April 15, 2008). If you're 55 or older, you may also be eligible to make "catch-up contributions" to your HSA, but you can't contribute anything once you reach age 65.

Note: Starting in 2007, you'll be able to make a one-time tax-free rollover of funds to your HSA from a health flexible spending account (FSA), a health reimbursement arrangement (HRA), or a traditional IRA (certain limits apply).

Can I Invest My HSA funds?
HSAs typically offer several savings and investment options. These may include interest-earning savings, checking, and money market accounts, or investments such as stocks, bonds, and mutual funds that offer the potential to earn higher returns but carry more risk (including the risk of loss of principal). Make sure that you carefully consider the investment objectives, risks, charges, and expenses associated with each option before investing. A financial professional can help you decide which savings or investment options are appropriate.

How Else Can I Use My HSA Funds?
You can use your HSA funds for many types of health-care expenses, including prescription drugs, eyeglasses, deductibles, and co-payments. Although you can't use funds to pay regular health insurance premiums, you can withdraw money to pay for specialized types of insurance such as long-term care or disability insurance. IRS Publication 502 contains a list of allowable expenses.

There's no rule against using your HSA funds for expenses that aren't health-care related, but watch out--you'll pay a 10% penalty if you withdraw money and use it for nonqualified expenses, and you'll owe income taxes as well. Once you reach age 65, however, this penalty no longer applies, though you'll owe income taxes on any money you withdraw that isn't used for qualified medical expenses.